HCL drags Atos to court on copyright infringement

HCL Technologies Ltd office premises in Noida (file picture). (mint)
HCL Technologies Ltd office premises in Noida (file picture). (mint)


The Noida-based company is seeking $132.4 million in damages from Atos, a copy of its court petition showed

Bengaluru: HCL Technologies Ltd has sued Atos SE in a US court, accusing the French IT services company of copyright infringement on two of the eight products it had bought from International Business Machines Corp. The Noida-based company is seeking $132.4 million in damages from Atos, a copy of its court petition showed.

Last month, HCL America, a unit of HCL Technologies, filed the case in a court in Texas demanding a jury trial, as it alleged that Atos continues to sell Portal Enable and Web Content Manager, together called DX and Domino software.

“As a result of the defendant’s ongoing violation of plaintiffs’ rights in the infringed software, Plaintiffs are entitled to money damages in an amount to be determined at trial, but in no event less than $132,401,743, plus attorneys’ fees, costs and interest," reads a copy of the complaint.

Till a few years ago, IBM used to license its products to technology services firms under an enterprise license agreement or ELA, which enabled both the owner of the product (IBM) and the IT services firm to earn money. In December 2018, HCL Technologies paid IBM $1.78 billion to buy eight software products, including IBM Notes, Domino, and Appscan.

HCL Technologies said in its complaint that the Atos’ ELA with IBM, under which DX and Domino were licensed, ended on 31 December 2021, but the French IT company continues to sell the two products to clients, despite HCL Technologies becoming the sole owner of the products.

“We do not comment on pending litigation," said a spokesperson for Atos. HCL Technologies also declined to comment.

The suit is a rare legal tangle between two technology services firms, as rendering services generally do not throw up ownership issues. But as more IT service firms look at building platforms and products, many executives maintain this opens them to more litigation.

“Indian heritage companies such as Zoho and Freshworks have more ongoing court cases compared with IT services firms of similar size because the ownership of the product and if a product has been copied always comes into question," an HCL Technologies executive said on the condition of anonymity. “It is only natural all the IT service providers, including us, will see more such legal battles as companies shift to having more products as part of their offering."

HCL is currently involved in at least half a dozen cases in the US after its purchase of IBM products, according to a review of ongoing litigation by Mint.

“The standard market value of license and support fees for defendants’ unauthorized deployments of DX is as follows: To date, the PVU (process value unit, which is a unit of measurement to determine licensing costs of IBM software) shortfall has a minimum license value of at least $90,373,068, inclusive of retroactive maintenance and support fees, plus a three-year maintenance value commencing in 2023 of at least $39,952,209, for a total value of at least $130,325,278," said the complaint by HCL.

HCL, which follows an April-March financial year, saw its dollar revenue grow 9.6% last year, as the country’s third-largest software services firm ended with $12.6 billion in revenue.

The company does not spell out the revenue share from its largest products but only said that about 11% of its business last year came from software, including the products it bought from IBM.

Atos, which follows a January to December financial year, reported a 4.6% growth to end with $12.17 billion in revenue.

However, Atos’ operating margin was 3.1%, as against HCL Technologies’ 18.2%. Slower growth and declining profitability prompted it to carve out its profitable big data and cybersecurity division into a new company, Evidian, while the mainstay IT infrastructure business remains under Atos.

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.



Switch to the Mint app for fast and personalized news - Get App